The Role of a Forensic Accountant - Research Paper Example

? Forensic Accounting in Practice Determine the five most important skills that a forensic accountant needs to possess and evaluate the need for each skill. Be sure to include discussion regarding the relationship between the skill and its application to business operations. In the current business scenario it is crucial for the forensic accountants to possess certain skills consistent with their job requirements. Extensive researches have been conducted in order to analyze the application of forensic accounting skills in business operations. Few are discussed below (Davis, 2010). Analytical This refers to the ability of an individual to analyze and interpret current situation with respect to future strategies. This is related with other skills such as detail orientation, responsiveness etc. Analytical skills are applied to different business operations, for instance, forensic accountants are needed to analyze legal documents where analytical skills help them in identifying the fraudulent activities. Intuition Intuition is required to give value added services. This skill is mostly acquired by knowledge, learning and experiences while developing the required capabilities. However, few researchers believe that intuition stems from natural habits and personality of an individual. Intuition is needed by the forensic accountants to improve logical analysis and programmed functioning of mind. For instance, forensic accountants use intuition to make opinions regarding financial reports and also to make linkage between different activities which might give a clue to the final fraud. Team Player This relates to the ability of a professional forensic accountant to work in cooperation with others. Team players are also required to perform the managerial activities such as leading, organizing, motivating etc. The investigations against frauds going in an organization cannot be conducted without an efficient and effective team. For instance, if a team is analyzing the financial statements, trends and ratios of a firm than all the working individuals are required to have clear opinion and consensus about the conclusions. Therefore people who are not good team players cannot coordinate well in such business operations and investigations. Auditing Auditing refers to the official inspection of financial reports and statements. The auditing skill is actually acquired by learning and qualifying the necessary courses for becoming a forensic accountant. However, experience plays a vital role in the overall development of this skill. Huge corporations especially those which are on large scale revenues are needed to conduct financial survey to identify the fraudulent activities. They hire auditors for this purpose and also to ensure the transparency of finances. Research It plays an important role in almost all the business operations but for the forensic accountants it is even more crucial. This is primarily because of the extensive research and investigations required to indentify a financial culprit. Forensic accountants have to be efficient in both primary and secondary research skills to effectively utilize them in different business operations. For instance, when a fraud is identified in an organization then the past activities and financial transactions of the culprit are extensively scrutinized which require the forensic accountant to be exceptionally good at research. 2. Describe the role of a forensic accountant within a courtroom environment. Forensic accounting is getting popularity due to recent cases of fraud such as the one of Enron. The role of a forensic accountant is changing dramatically with respect to the courtroom environment. Since major part of the fraud investigations depends upon accounts therefore accountants must be able to present their view point supported with evidence in courts. These evidences are then evaluated by the lawyers, juries, attorney and judges (Stuart, 2006). Following is a brief description of forensic accountant’s role within a courtroom environment (Winston, 2013). Gathering Information: The information is collected through the internal and external sources with includes financial statements, trends, economic data, company policy, court procedures, fraud articles in law etc. Analysis: The gathered information is analyzed through the accountant’s analytical and intuitive skills. These are then further scrutinized by the lawyers and jurists. Preparation: All the collected data and reports are then prepared to be presented in the court. Presentation: Here, the extensive communication skills of a forensic accountant come into play. He has to briefly and confidently present his case in front of the court which must be supported by strong arguments and evidences. 3. Analyze the legal responsibility a forensic accountant while providing service to a business. In the modern world business operations such as marketing, insurance, worker dealing etc are highly challenging and require more legal support than previous times. Hence the services of a forensic accountant are extensively required to identify any lapses in the organizational performance. For instance, an accountant can be required by an organization in the following circumstances (Rusell, 2010). Claim of an injury: Here, he is responsible to investigate the injured person and his financial claims made against the organization. The accountant while using his core skills and abilities would not only identify the nature of injury rather he is also supposed to formulate the compensation criteria. In some of the adverse situations this might also include doctor’s findings and the overall impact on the organizational revenues. Organizational Disputes: There can be different disputes among the partners and shareholders which are to be resolved by the forensic accountants. For instance, they are required to conduct detailed analysis of dividends, financial claims and the accounting records. Thereafter the nature of dispute is identified which further leads to the possible solutions made by the accountant. Damages: Damages which occur on commercial basis are looked after by the forensic accountants who must support their investigation reports with witnesses and strong evidences. Damages commonly involve breach of contract, construction claims, fraud, property issues etc. Fraudulent Employees: One of the core responsibilities of a forensic account towards the business operations is to trace out the lost financial assets and to indentify the culprits. They are basically in charge of covering all the genuine assets of the company which might have been taken over by some business partner or an employee. 4. Research two cases where forensics accountants have provided vital evidence in a case. Summarize the cases and the importance of the forensic accountants’ role during each case. Following are the two cases which summarize the role and importance of forensic accountants in providing vital evidence against illegal and fraudulent activities in an organization. Case 1: The Enron The disintegration of Enron is a significant example to substantiate the role of forensic accountants in large organizations. Enron was performing very well before it drifted its shares on the stock exchange market of New York. Subsequently the managers started giving false statements to get more and more investments. Hence the share price of Enron kept on rising whereas the shareholders were uninformed about the position of company’s revenues and its future profits (Crumbley, 2007). The organization continued its operations by selling the shares with false information until the real case was identified by the forensic accountant. Enron collapsed within a quarter of its operations after releasing shares into the market. However, the forensic accountants continued their investigations and found the core inconsistencies made to the financial statements and profits of the organization. Consequently, the responsible managers were challenged in court by the accountants. This case clearly substantiates the crucial rule of forensic accountants in an organization (Crumbley, 2007). Case 2: The Sunbeam In the late 90’s Sunbeam was dealing in appliances and their manufacturing. At that time the company used to report its sales for the first quarter even when the goods were not delivered. In normal circumstances the sales must not be reported prior to the shipment of products out of the warehouse. Due to the inconsistency in financial reports Sunbeam was making huge profits on paper while the goods were still waiting in the warehouse (Crumbley, 2007). Hence a forensic accountant was appointed to investigate the case. The accountant found out that the billing procedure and holding back of the inventory was not an illegal act but since shareholders were cheated therefore the managers were challenged in the court. Critical evaluation of the financial statements revealed that the numbers were manipulated due to which overall credibility of the firm was devalued. Analyzing the values in financial statements is a crucial part of an accountant’s job which plays a vital role in dealing with such cases (Crumbley, 2007). References Crumbley, D. H. (2007). Forensic and Investigative Accounting. London: CCH. Davis, C. (2010). Characteristics and Skills of the Forensic Accountant. USA: American Institute of Certified Public Accountants . Rusell, L. &. (2010). Intellectual Property: Valuation, Exploitation, and Infringement Rights. Hoboken, N.J.: Wiley. Stuart, P. (2006). A Moral Theory of White Collar Crime. Oxford.: Oxford University Press. Winston, E. (2013). Describe the Role of a Forensic Accountant in a Courtroom Environment. Retrieved Nov 17, 2013, from GlobalPost - International News. Read More